Opportunity Evaluation under Risky Conditions: The Cognitive Processes of Entrepreneurs

2002/04/01 by Hean Tat Keh, Maw‐Der Foo, Boon Chong Lim · 5 citations
Business, Management and Accounting · #Entrepreneurship Studies and Influences #Private Equity and Venture Capital

paper · doi:10.1111/1540-8520.00003

openalex publication_date 2002/04/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/04

Abstract

Even though the entrepreneurship literature places much emphasis on opportunity recognition, little is known about how entrepreneurs actually evaluate opportunities. This study uses a cognitive approach to examine opportunity evaluation, as the perception of opportunity is essentially a cognitive phenomenon. We present a model that consists of four independent variables (overconfidence, belief in the law of small numbers, planning fallacy, and illusion of control), a mediating variable (risk perception), two control variables (demographics and risk propensity), and the dependent variable (opportunity evaluation). We find that illusion of control and belief in the law of small numbers are related to how entrepreneurs evaluate opportunities. Our results also indicate that risk perception mediates opportunity evaluation.

Citations

• Cognitive mechanisms in entrepreneurship
• The Vignette Technique in Survey Research
• Entrepreneurs' perceived chances for success
• The moderator–mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations.

Cited by

• The artisans' dilemma: Artisan entrepreneurship and the challenge of firm growth
• Measuring opportunity evaluation: Conceptual synthesis and scale development
• The Study of Bias in Entrepreneurship
• Two decades of cognitive bias research in entrepreneurship: What do we know and where do we go from here?
• Hean Tat Keh [wikipedia]